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I. Burning money

At the entrance to the offices of what used to be Institutional Venture Partners -- until just a couple of months ago, one of the leading venture capital firms in Silicon Valley -- hangs a painting called "The Burn Rate": a giant blow-up of a $1,000 bill, scorched to within a few milliseconds of disintegrating. The reference is to the rate at which a new technology firm "burns" through money. Everybody who walked through the IVP doors would instantly get the point: "Buddy, if we're financing your company, remember that we're throwing money on the fire betting on you."

The fricasseed bill seemed to me to be a strikingly inappropriate symbol for IVP. Just think about the name for a second: Institutional Venture Partners. Frankly, it didn't sound like the name that financial cowboys, used to throwing money on bonfires, would come up with. Institutional Venture Partners sounded like the corporate equivalent of the accountant who corners you at a party to talk about retirement annuities.

This seemed, until recently, like a fair enough picture of venture capital as a whole. Venture capitalists are the people who finance start-up technology ventures. Yet while the start-up entrepreneur is the cowboy of the technology world, the venture capitalists behind the start-ups often projected a calculated blandness. They lived in quiet wooded houses in expensive suburbs. They dressed in polo shirts with the names of their star companies. Their one concession to the gung-ho mentality of start-up life tended to be driving fast cars.

Yet the money in venture capital kept piling up. First more or less quietly, and then, with the coming of the Internet, very, very loudly, investments of $5 million here and $3 million there turned into fortunes of hundreds of millions of dollars almost overnight.

Not long ago, I found myself in the IVP office again. I'd been there several times before, but this time, IVP senior partner Geoff Yang was explaining to me why there would be no more IVP. Yang and two of his partners were joining with three technology financiers from another venture capital firm, Brentwood Venture Capital, to start a new group, at the time code-named "T-Rex." The code name, of course, was something of a calculated swipe at the staid old images that names like Institutional Venture Partners and Brentwood Venture Capital projected. Calculated or not, however, for the venture capitalists, T-Rex was something of a coming out -- an attempt to live up to the spirit of " The Burn Rate," a bid to make venture capital sexy.

In fact, quietly, venture capital had become sexy, though, and T-Rex -- now officially called Redpoint Ventures -- was only the most obvious manifestation of the trend. Sand Hill Road, the strip of California asphalt that is the headquarters of many leading venture capitalists, had turned into Silicon Valley's own little Hollywood.

Next page | Want to start a company? Find a brand-name producer -- er, financier